Update : Aug. 01, 2012
[Tokyo Stock Exchange, Inc.]
Today, the Ministry of Justice released the draft outline of amendments to the Companies Act (hereafter the "draft outline of amendments"). We would like to welcome the fact that a certain consensus was reached as a result of rigorous discussions involving concerned parties and knowledgeable persons including those from the business community.
With a view to providing investors with an environment in which they can trade with confidence, during the deliberations on the draft outline of amendments, Tokyo Stock Exchange, Inc. (hereafter "TSE") has been consistently arguing that an independent outside director is essential for all listed companies. A majority of listed companies have already appointed at least one outside director. In particular, the number of such listed companies has risen sharply over the past two years. We think this draft outline of amendments will ensure that this trend continues.
The draft outline of amendments comes with an accompanying resolution that "there is the need to establish discipline in the rules and regulations of financial instruments exchanges to the effect that listed companies shall strive to secure at least one independent board member that is an outside director". Following the finalization of the draft outline of amendments, we at TSE will swiftly proceed to review our listing regulations. We will take the opportunity to again request listed companies to secure an independent outside director in the board of directors, and such request will include consideration of transitioning to the new "Company with Audit and Supervisory Committee" structure which will be introduced.
In addition, in the draft outline of amendments, listed companies without outside directors will be required under the Companies Act and related ordinances to disclose "the reason why appointing an outside director would be inappropriate". We would like to encourage shareholders and both domestic and global investors to assertively utilize this information in their communications with listed companies and when exercising their voting rights.
The combination of this draft outline of amendments and the accompanying resolution is a version of the current "comply or explain" approach in Europe that has been customized for Japan. Implementation will foster mutual understanding and trust through encouraging communication between listed companies and investors and exercising voting rights, thereby enhancing the corporate governance of listed companies. We look forward to this being an important turning point toward a more transparent securities market in Japan, casting away much of the gloom over the Japanese economy, and restoring the investment appeal of Japanese corporations.
Finally, this draft outline of amendments also includes measures to encourage rights issues which have been put forward by TSE.
Rights issues do not entail enforced share dilutions and are not just a fund-raising method that favors existing shareholders. It also holds great promise as a means of preventing insider trading surrounding capital increases through public offerings which has recently been a serious problem.
TSE will collaborate with securities companies, trust banks, Japan Securities Depository Center, Inc. and other related institutions and parties, and continue to channel efforts toward developing the actual environment to facilitate the use of rights issues.
August 1, 2012
Tokyo Stock Exchange, Inc.
Atsushi Saito, President & CEO
Tokyo Stock Exchange, Inc. Listing Department Tel: +81-3-3666-0141